1) What was the ethical misconduct in the WorldCom case? 2) What management behaviors led to the financial fraud that was committed? 3) What would you do if you were faced with a similar situation? dule 2 Assignment - 23W8с+felician.brightspace.com/d21/lms/dropbox/user/folder_submit_files.d21?ou-30838&isprv=0&db=141143&cfql=0In her book, Ms. Cooper outlined the following threeparts of a fraudtriangle; 1) pressure, 2) rationalization, and 3) opportunity. She explained in theexample of World Com that pressure from Wall Street analysts and investorsinfluenced executive's faulty decision making. They were expected to maintain a highgrowth rate even though the growth was due to their acquisitions of telecomcompanies. The CEO Bernie Ebbers put pressure on CFO Sullivan and the accountingdepartment to "hit the numbers" (Taylor, 2009). The second piece of the fraudtriangle, "rationalization," occurred at WorldCom when the CFO Sullivan convincedthe accounting personnel to participate in the wrongdoing and claimed it was a one-time event (Taylor, 2009). According to Ms. Cooper, the employees continued toparticipate in the fraud because they feared being fired. According to currentmanagement literature by Solas (2019), research on followers and "acolytes" or"bystanders" who witness wrongdoing stay silent whether or not they benefit fromsupporting their leaders. Previous researchers in his study claim that "...some, if not allof the ethical problems in corporate capitalism revolve around a failure or leadership"(Solas, 2019). Executives at World Com did the same thing by condoning misconduct.The third part of the fraud triangle, "opportunity" refers to the accountinginformation systems that were keys to committing the fraud and its discovery atWorldCom (Taylor, 2019). Weak internal control systems and WorldCom's newacquisitions resulted in many different accounts receivable systems and billingsystems. The fraudsters took advantage of the weak internal control and documentsystem. Cooper explains that during her audit work she found questionable journalentries for capital expenditures. The internal auditors were able to access only thebalance sheet side of the transaction. The fraudsters knew the internal auditors hadlimited IT access and took advantage of this. Ms. Cooper enlisted an IT departmentally to run a Beta version of the transactions at night to allow them to locate there that she needed to present to the Audit Committee chair. The authorSubmitCancel audit group constantly gave warnings to managementabout the dangers of a weak internal control system (Taylor, 2019). According to2320F3$4000F4%5F5A6&F78C ignment - 23W8 X +felician.brightspace.com/d21/lms/dropbox/user/folder_submit_files.d21?ou=30838&isprv=0&db=141143&cfql=0men access and took auvantage or uns. Mis. Couper enlisteu arrrr ucparumentally to run a Beta version of the transactions at night to allow them to locate theevidence that she needed to present to the Audit Committee chair. The authordescribes how the internal audit group constantly gave warnings to managementabout the dangers of a weak internal control system (Taylor, 2019). According toCooper, the internal audit department and management had a contentiousrelationship. In addition, the CFO Scott Sullivan told Cynthia Cooper that the financialstatements were the domain of external audit and not a concern of internal audit(Taylor, 2019). Sullivan blocking internal audit's attempts to review Arthur Andersen'swork was a clear sign of management's attempt at deception. When Ms. Cooperpresented her findings about fraudulent accounting entries to the Audit Committee,the Audit Committee chair thanked her and told her to go home and that accountingtreatment was an issue between management and KPMG, the successor auditors toAndersen (Taylor, 2019). Ms. Cooper's discovery of this major accounting fraud led tothe largest bankruptcy in the history of the U.S. to date (Taylor, 2019).The strength of Cynthia Cooper's character and skills were exhibited in her book,Extraordinary Circumstances: The Journey of a Corporate Whistleblower (2008).When faced with hostile management and a lack of support from her AuditCommittee chair, she told truth to power. Ms. Cooper's work at World Comcontributes to the accounting field by providing details on how to identify corporatefraud and the culture that enabled it. The strength of Cynthia Cooper's book is thatstudents can learn from her experience the ways in which companies use accountinginformation systems to commit financial fraud. Business students can benefit byreading Ms. Cooper's experience to better understand a corporate culture that maylead to misconduct. By studying Cynthia Cooper's work, students will be able todetermine whether they should be whistleblowers if faced with similarcircumstances.Submit2CancelF2320F3$4F45F5A6&7F7*8FB

Ethics refers to the ethical standards, values, and rules that oversee human behavior and…

Answered: 1) What was the ethical misconduct in…

1) What was the ethical misconduct in the WorldCom case? 2) What management behaviors led to the financial fraud that was committed? 3) What would you do if you were faced with a similar situation?

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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